It's Official - The Fed Is Now Buying European Government Bonds

As if the 'risk-less' dollar-swaps the Fed has extended to any and every major central bank were not enough, William Dudley just unashamedly admitted that the Fed now holds 'a very small amount of European Sovereign Debt'. Explaining this position, as Bloomberg notes:

*DUDLEY: FED HOLDS OVERSEAS SOVEREIGN DEBT TO MANAGE RESERVES

*DUDLEY: HIGH BAR FOR ADDITIONAL PURCHASES OF EUROPE DEBT

Dudley, testifying to a House panel, noted that he doesn't see more efforts by the Fed to buffer the US from Europe's tempests and believes European banks are deleveraging in an orderly manner. So not only is the US taxpayer bailing out Europe via the IMF (as we noted here a week ago using Greece as an intermediary) and the Fed is providing limitless USD swap lines but now we join the ECB in monetizing European government bonds - something we warned might happen back in December 2010. As for being a small amount - wasn't MF Global's holding relatively small too? And aren't we getting a little full from all this buying?

I believe this is all part of their double-secret mandate that they have withheld from the public, for our own good, of course.

This is a trial balloon. If they receive no punishment then they know they have the greenlight to expand teh program at any time. They can just say, "hey, nobody told us to stop back in March 2012". It is all so simple.

This idea has been in the mix for some time, and I have complained about the lack of decisiveness of Fed officials on matters of such importance. This move demonstrates confidence, firmness and a desire to proactively solve the underlying issues in today’s global economy. The Greek CDS trigger was a truly disastrous event for American primary dealer institutions and other SIFIs since it incurred them with large liabilities. Bernanke recognizes that this has set a president for a series of cascading credit events across Europe which together could be apocalyptic for the balance sheets of our most important American financial institutions. Hence the Fed is being vigilant and taking the necessary steps to promote stability and monetary union across Europe.

This may be boring to you. But it is actually of grave importance to our financial system as we know it today. You're probably one those libertarians that use the services provided by world class institutions such as JP Morgan, Bank of America and Meryl Lynch every day but then scornfully criticise these very institutions. People like you just make me sick.

You're probably one those libertarians that use the services provided by world class institutions such as JP Morgan, Bank of America and Meryl Lynch every day but then scornfully criticise these very institutions.

Those "world class institutions" are looting the economy dry, preventing any sort of economic recovery, while they party high gambling with people's wealth, paying huge bonuses, and Bernanke is the one giving them trillions of dollars of people's wealth via his printing press.

They're not "world class institutions".

They're pirates looting America dry with Bernanke's full cooperation.

And no, I don't do business with any of them, and no I'm not libertarian either. I'm an American getting pretty damn tired of watching the value of dollars in my pocket drop as Bernanke runs his printing press giving my wealth to those pirates.

I have a BofA account and a Merrill Lynch account. I use my Merrill Lynch account to exit my vested options in a company I own shares in as fast as possible. Not because I think the company is in bad shape, but rather the underlying system is in very bad shape. I then transfer my funds into my BofA account where I use that to do wire transfers into hard assets I take possession of.

Yes I scornfully criticize BofA for the massive derivative positions it holds and the bail out it begged for and received. I also criticize the FED for the huge injection of liquidity BofA got. I criticize BofA for buying US treasuries with the money and collecting huge interest and then paying off its bail out with that money at tax payer expense. IF they, and the rest of the bank and trading scums were ACTUALLY responsible entities; I would keep my money in them, I would invest in equities with them, I wouldn't feel the need to pull all my cash out of them now while I still can.

You know what makes me sick? People like you who kiss Paul Krugman's erroneous ass and carry all these worthless slobs water.

"Bernanke recognizes that this has set a president"??? Do you mean precedent, or do you really mean Bernanke picks the President, who then picks Bernanke, and then Bernanke comes and saves the world from whoever it is that is skull fucking us all? So many questions, so few answers, and inquiring minds want to know. But it sounds like your complaints have been heard, and I think by the god that Goldman Sachs works for, thank you mutherfucker. Where before they were just shaking us by our heels, now they're turning out pockets inside out while we're upside down... And you think he's doing a great job? Well, good things don't hurt, so shove this one up your ass.

Bernanke seems to like a light touch but if we want to truly further the solid but slow recovery of the world, not just America, it's time we get all the central banks together, issue SDR's and dollars at sufficiently high rates to fully recapitalize every part of the finance sector, of the efforts to spread democracy to underprivileged Muslim nations (which is the most effective way to thwart terrorism) by ensuring more cost+Plus contracts go to Raytheon and STOP WORRYING about silly budget deficits and ... finally bite the bullet and admit we have too much of a danger of deflation.

Inflation is already very low so if we can't stem the bleeding we risk gas and oil prices dropping to dangerously low levels.

Now you see what I did there mini-B?

I wasn't gonna write this shite for ya but come on ... YOU CAN DO EEEET.

Senator, I'm afraid that was a one time offer made to us by the ECB with respect to the PSI in exchange for funds matched by the monies expropriated from private accounts by the Bank of Greece for which we are acting as custodian for the Rothschilds interests in the City of London. We purchased the obligations at a dollar price of 122 1/2+ 1/164th and in our judgement as a category 3 asset, shall be holding them at the greater of cost or market value in compliance with Generally Accepted Don't Bullshit A Bullshitter Bookkeeping Principles.

While they're at it, why not buy the missing portion of the MF Global customer accounts on the thought that JPM will be good for it at some point... the Fed appears to have 'the funds', and it's a relatively trifling amount....

This is all completely disgusting and more importantly ILLEGAL! Taxation without Representation is when taxes go to bullshit like this (and remember when gov organization prints as the fed does it is essentially more regressive taxation much worse than say sin tax since it's essentially forced sin tax on all of your purchasing and your entire life).

eh? illegal? anyway, legal or not, it's standard practice for Central Banks. it's called FX reserves... of course the accumulation of FX reserves is something that usually all the other Central Banks do - the FED did not need it during the gold standard and did need it even less since the dollar is the global reserve currency - hence the trillions of USTs on the balance sheet of the Chinese, Japanese and european central banks...

of course, IF the dollar loses the reserve currency status it will need more FX reserves...

utterly bullocks. I went through the Act and some summaries of the 200 laws regulating the FED. Not illegal. Just a question of politics involved. FX operations are usually directed by the Treasury and executed by the NY-FED, that's all. The whole debate of legality/illegality is centered on the open market transactions through the Primary Dealers.

The FED/Treasury complex holds FX-reserves in the form of foreign bonds since the times where you had to hold some of the reserve currency bonds for Central Banks operations - of course between 1913 and 1945 those were the British Pound Sovereign Bonds.

my roomate's sister makes $85 hourly on the computer. She has been fired from work for 6 months but last month her paycheck was $16158 just working on the computer for a few hours. Read more here ..... http://lazyCash9.com

Does anybody have any doubt that Bernanke, and his handlers, think they are above all laws? They are the alpha. They are the omega. They are everything. Just ask them.

I still say in 2009 the new system began. It is the system of unlimited printing. There is no regulator on their HP 92000 Laserjet. There is only one way forward and that involves a ton of toner. Just don't get any on your shirt. It is a bitch to get off. Don't use water. You have to vacuum it.

With attitude, I shit into a box, maked it AAA, and threw in a 100 Trillion Zimbabwe note. I will be taking this thing up to the Cleveland branch of the Fed and applying for a swap line with this as collateral. I am willing to bet I could get a billion for it, park it in short term treasury, and collect a nice interest payment on that.

Purchase and Sale of Obligations of United States, States, Counties, etc., and of Foreign Governments

(b)

To buy and sell, at home or abroad, bonds and notes of the United States, bonds issued under the provisions of subsection (c) of section 4 of the Home Owners' Loan Act of 1933, as amended, and having maturities from date of purchase of not exceeding six months, and bills, notes, revenue bonds, and warrants with a maturity from date of purchase of not exceeding six months, issued in anticipation of the collection of taxes or in anticipation of the receipt of assured revenues by any State, county, district, political subdivision, or municipality in the continental United States, including irrigation, drainage and reclamation districts, and obligations of, or fully guaranteed as to principal and interest by, a foreign government or agency thereof, such purchases to be made in accordance with rules and regulations prescribed by the Board of Governors of the Federal Reserve System. Notwithstanding any other provision of this chapter, any bonds, notes, or other obligations which are direct obligations of the United States or which are fully guaranteed by the United States as to the principal and interest may be bought and sold without regard to maturities but only in the open market.

To buy and sell in the open market, under the direction and regulations of the Federal Open Market Committee, any obligation which is a direct obligation of, or fully guaranteed as to principal and interest by, any agency of the United States.

This drafting sucks shit through a straw... a colon and parenthetical numbers or at least semi colons after each permitted action should be included... it's just one giant run-on sentence. As a result, once you get past reclamation districts, it's not really clear what it says.

I think it would help clarify things if you would bold the phrase "and obligations of" and leave "or fully guaranteed as to principal and interest by" unbolded. It should also be noted that there appears no six month limtation on the foreign government obligations... (notice how it's included for each and every other class of bond/obligation purchase).

Clearly, a foreign government isn't going to guarantee an obligation of a united states' state agency... so, I don't think that's a reasonable interpretation...

Seems to me like it's a retreat on this issue and make sure this is actually the law and it was properly enacted, etc... (all of which are long shots).

I agree entirely, but particularly with your first paragraph. Makes you wonder whether confusion and room for competing interpretations was the intent.

The way the bolding is (now permanently) set in the post is probably the lesser of all of the evil interpretations. I think your suggested arrangement, which is far, far broader, is how they would argue it though.

I think you have to give ties to the runner... in this case, if it is a plausible interpretation of the statute, then the FED can't be held accountable... [this is also why government should NEVER intrude in these matters because the drafting is incredibly technical and the people working for the government cannot draft shit... most of whom have proven this fact by being run out of private practice].

How does this violate the Federal Reserve Act? All it is is a QCMMPEFEOS, Quantitative Currency Manipulation Market Purchase Exchange Foreign Easing Operation Strategy. It's what Thomas Jefferson was talking about in the Ghettiesburg Address.

Purchase and Sale of Cable Transfers, Bank Acceptances and Bills of Exchange

Any Federal reserve bank may, under rules and regulations prescribed by the Board of Governors of the Federal Reserve System, purchase and sell in the open market, at home or abroad, either from or to domestic or foreign banks, firms, corporations, or individuals, cable transfers and bankers' acceptances and bills of exchange of the kinds and maturities by this Act made eligible for rediscount, with or without the indorsement of a member bank.

You see, this is actually good news for those who stand for justice, for several reasons. The least of which is this indicates that the pressures are far too high and the game too deep... we are very close to seeing the second reiteration of Lehman on a global scale...

the dollar is dead in 2012. and when the derivatives implode timmay and his butt buddy bernank will be bailing out the whole world with dollars. why do you think stocks are rocketing up? everyone wants out of paper

If the Fed (a private bank) now owns the world, why isn't everyone in the world demanding a complete audit. I mean, if what the Fed is doing is not criminal, then why wouldn't those private entities and names behind the Fed (collecting all that interest) be willing to show themselves in the light of day?

This is the final phase of the game... Flood the world with infinite amounts of worthless money... Meanwhile, hold on to as much of it as you can to fill your personal bunkers with gold & critical commodities... Try to keep the sheeple as distracted & entertained in the process & you have a good chance of hoarding most of the loot when the end finally does come...

Let them wander around starving for a bit of time... Then when they can't take it anymore, skip on it with THE SOLUTION... (a new central banking system based on GOLD, which they have stockpiled in mass quantities)...

yes, many have said that the greatest transfer of wealth the world has ever seen will occur when gold is once again re-valued. Of course, might want to check the physical compostition of certain stashes. History is littered with governments that tried to physically manipulate gold holdings to make them look bigger than they were by variuous physical manipulations of the metal. And yes they will always care, hence there will never be an audit. Some big players got burnt by MF-global. Players, that could easily fund private armies with significant firepower.

I'll say one thing... Despite the daily bash that goes on here at ZH (vis-a-vis "kicking the can")... I can honestly say that having been thoroughly UNPREPARED for most of my adult life for what is to come... I'm actually grateful for the extra time that "kicking the can" is providing me in getting myself as ready as possible...

The Non-Federal Reserve-less Non-Bank, which has done an illegal end run around the prohibition against buying U.S. Treasuries from the U.S. Treasury by buying said Treasuries in the "secondary markets," and whose balance sheet has risen from 360 billin to 3 trillion USD in the last 4 years (that balance sheet expansion being a massive factor for inflationary forces/U.S. currency debasement) is now also buying foreign government sovereign debt...

...wow.

Is there anyone who is going to call a spade a spade, and even ask our check-and-balance arm of government that exists in the form of the judiciary, whether The Federal Reserve is acting in conformity with our laws?

Thank you, ZH. This article served to get my drinking started a little earlier than normal today.

The Bloody Mary 12-Step Program®

...for those of us who have been to AA and found it not quite our style.

My name is X-Man and I could be an alcoholic, but I've chosen not to because I hate joining groups and going to meetings. I do like to drink, on occasion, moderately, or maybe not so much, but only when there's time, which is always.

I don't think alcoholism is actually a disease or a disorder. Rather, I believe that it's another stupid idea from people with no sense of decency, adventure or desire to have any fun at all during the course of one's life, but rather impose their will - like we asked (we didn't) - upon others because of some overriding moral compass that tells them puritanical behavior is best for all.

The people who drink alcoholic beverages (we are legion, by the way) and those who casually imbibe spirits without regard to their health and general welfare should be able - as adults - to do as they please, without some nagging Nanny nincompoop telling us that such activities will lead to loss of income, love and/or life. The world is full of people who drink, drank, have drunk, are still drinking at all levels of expertise without suffering in the least. Maybe a bit of a hangover or temporary memory loss, but really, should we have to remember every damn little thing we've ever done?

There are 12 steps to making one of the most delicious Bloody Mary's you've ever had. This small guide takes you through the steps, one by one.

My preference is make step 2 (adding ice) the last step. Mixing all the ingredients is easier and more thorough without the ice in the glass, especially thick things like horseradish. The disadvantage to adding the ice as last step is that the mixture tends to splash outside the glass as ice is plopped into the glass. So, I use a tong to lift first ice cube into glass. Then I use tong to add each ice cube by placing it (carefully, gently) on top of previous ice cube in glass. After the ice cubes are placed in the drink, I give it final stir. It is more trouble to do make Bloody Mary this way, but for me the mix is better, plus I got nothing better to do than to take more time constructing the Perfect Bloody Mary.

--------------------------------- By knowing what happened in indebted Greece, where loan sharks created “bubbles” and the current inhuman debt, one can understand the inhuman plan in total ...understand where this plan started just to bring all states at the same end ...understand how this type of plans are established...